Evaluating Tax Time Savings Interventions & Behaviors February - - PowerPoint PPT Presentation

Evaluating Tax Time Savings Interventions & Behaviors

February 20, 2020 2-3:30pm ET; 11am-12:30pm PT

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Justin Chu

Senior Program Associate, Field Engagement Prosperity Now

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▪Welcome and Setting the Table ▪Here’s the Headlines ▪Report Background and Methodology ▪Filers and Refunds ▪The VITA Experience ▪Q&A Session ▪Close

What’s in store for today?

Today’s Speakers

Justin Chu

Senior Program Associate Taxpayer Opportunity Network

Rebecca Thompson

Project Director Taxpayer Opportunity Network

Susan Mason

Director Intuit Financial Freedom Foundation

Today’s Speakers

Tim Lucas

Director of Research SaverLife

Zoraima Diaz-Pineda

Financial Security Manager CDC of Brownsville

Stephen Roll

Research Assistant Professor Social Policy Institute

Welcome from TON

Rebecca Thompson

Project Director, Taxpayer Opportunity Network Prosperity Now

Welcome from TON

Welcome from IFFF

Susan Mason

Director Intuit Financial Freedom Foundation

The Headlines

Rebecca Thompson

Project Director, Taxpayer Opportunity Network Prosperity Now

Tax Time Savings gs Research and Preliminary Findings gs

Rebecca Thompson, Prosperity Now Tim Lucas, EARN Mindy Hernandez, Prosperity Now Stephen Roll, Washington University in St. Louis

What is the relationship between tax time savings and the financial well-being of LMI taxpayers? What is the relationship between tax time savings supports and interventions and taxpayer savings behaviors and balances?

Headlines: People are saving…we just didn’t know

39.3% 6.5% 40.2% 20.5% 14.3% 17.4% 40.2% 79.2% 42.4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Respondents (%)

Intended to Save and Did Save Intended to Save but Did Not Save No Saving Intentions

LMI tax filers are saving a portion of their refund at higher rates than previously thought or measured, but a number

• f filers who intend to

save are not successful when they get their refund.

Headlines: Savings helps guard and protect against financial hardship

1 2 3 4 5 6 7 8 9 VITA SaverLife TTFFP

Change in Financial Well-Being Score

Refund Saved at Follow-Up Intend to Save > 6 mo

Tax filers who successfully saved experienced fewer hardships and higher financial well-being after filing their taxes.

Headlines: People use their refunds for a variety of reasons, not just savings

0% 10% 20% 30% 40% 50% 60% VITA SaverLife TTFFP

Respondents (%) Purchase household necessities (rent, bills groceries) Pay down debt (credit card, pay day, past due bills) Saving for emergencies or unexpected needs Save for specific future purchase (education, home, vacation)

Savings is just one of the uses of the refund and not the most important use for many LMI tax filers.

Headlines: VITA programs are inconsistent in promoting and supporting savings

2 4 6 8 10 12 14 16 18 Connecting to benefits Emergency savings Complex returns Respect to clients

• No. of Responses

Highest Priorities, VITA Site Coordinators

Despite evidence that interventions can support successful savings, there are many barriers to integrating savings programs and other financial capability services into VITA sites.

Report Background and Methodology

Stephen Roll

Research Assistant Professor Social Policy Institute

Background and Motivation

• Little systematic research assessing the needs and

behaviors of free tax prep customers

• Limitations in measuring savings behaviors at tax time

– Form 8888, depositing to a savings account

• To address these limitations, the Social Policy Institute,

CFPB, Prosperity Now, Intuit, and SaverLife developed new survey instruments to:

– Provide VITA sites with a standardized measurement tool – Develop a deeper understanding of refund savings behaviors at tax time and in the months after – Better understand the needs of filers in different free file contexts

Survey Design

• Two surveys: One at the time of tax filing and
• ne in the months after tax filing

Platform VITA SaverLife TTFFP Wave 1 Sample Size 579 653 14,928 Timing During tax filing Near tax time Following tax filing Mode In-person Online Online Wave 2 Sample Size 171 106 2,615 Timing 3-6 months after filing 6 months after filing 6 months after filing Mode Phone/online Online Online

Survey Design, ctd.

• The surveys asked questions capturing:

– Refund characteristics – Refund savings and usage – Demographics – Income – Hardship experience – Emergency resources – CFPB’s financial well-being scale

• VITA filers and program managers/site

coordinators received additional VITA-specific questions

Demographic and Financial Characteristics, by Platform

Platform VITA SaverLif e TTFFP mean/pc t mean/pc t mean/pct

Demographic Characteristics

Female 68% 77% 51% Age 52 38 35 Race White, Non-Hispanic 39% 43% 72% Black, Non-Hispanic 21% 30% 5% Asian, Non-Hispanic 1% 6% 7% Latino 37% 10% 10% Other 2% 11% 6% Married 25% 38% 11% Bachelor's Degree or Higher 24% 42% 44%

Financial Characteristics

Income Volatility No Volatility 77% 61% 62% Some Volatility 13% 23% 26% High Volatility 11% 16% 12% Have any credit card 63% 75% 64% Paid credit card in full 39% 45% 43% Alternative financial services 7% 19% 20% No Access to $400 22% 15% 7% Observations 1,016 653 14,928

Median Income: VITA: $20-30,000 SaverLife: $15k-20k TTFFP: $15k-20k

Refund Characteristics, by Platform

VITA SaverLife TTFFP Tax Time Expect refund 85% 88% 81% Refund saving intentions No saving 39% 7% 40% Intend to Save 61% 94% 60% Save but spend < 6 months 17% 19% 13% Save > 6 months 43% 75% 47% Refund saving locations Cash 4% 10% 6% Checking 40% 15% 33% Savings 50% 63% 67% Pre-Paid 1% 6% 1% Retirement 1% 5% 5% Other 4% N/A 3% Follow-up (3 – 6 months post-filing) Refund saving rate (actual) 53% 84% 55% Tax Time Observations 1,012 655 14,814 Follow-Up Observations 171 106 2,625

Refund Savings Intentions and Behaviors, by Platform

39.3% 6.5% 40.2% 20.5% 14.3% 17.4% 40.2% 79.2% 42.4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% VITA SaverLife TTTFP Respondents (%) Intended to Save and Did Save Intended to Save but Did Not Save No Saving Intentions

Characteristics of Successful Savers, by Platform

A successful refund saver at VITA sites… A successful refund saver at SaverLife… A successful refund saver in TTFFP…



Did not experience high levels of income volatility



Was older on average



Was slightly more likely to be Non- Hispanic White or Asian



Explicitly saved their refund for emergencies



Explicitly saved their refund for emergencies or for specific purposes like education



Was slightly more likely to be married and had at least a bachelor's degree



Did not report using credit-based alternative financial services



Did not report using their refund for household necessities or healthcare expenses



Saved their refund in a savings or retirement account



Did not save their refund on a pre- paid card



Explicitly saved their refund for emergencies or for specific purposes like education



Did not experience any hardship in the months after tax filing



Had higher income and less income volatility



Did not report using credit-based alternative financial services



Could already manage an emergency expense prior to receiving the refund



Did not experience any hardship in the months after tax filing



Did not report using credit-based alternative financial services

Most Important Uses of the Refund, by Platform

VITA SaverLife TTFFP

The Relationship between Refund Savings and Financial Well-Being, by Platform

The relationship between refund savings intention and changes in financial well-being score (regression results) 1 2 3 4 5 6 7 8 9 VITA SaverLife TTFFP Change in Financial Well-Being Score Intend to Save > 6 mo Intend to Save < 6 mo

** **

1 2 3 4 5 6 7 8 9 VITA SaverLife TTFFP Change in Financial Well-Being Score Refund Saved at Follow-Up The relationship between refund savings action and changes in financial well-being score (regression results)

***

*** p<0.01, ** p<0.05

**

Key Takeaways

• These findings point to weaknesses in

traditional measures of refund savings.

– Overall split rate of <1% at VITA sites compared to a refund savings rate of 53% in this study.

• Most filers intend to save their refund, and a

majority of these filers successfully save.

– Successful savers were those with less economic volatility and who explicitly planned to save the refund for emergencies. Implication: Filing platforms may be able to influence the “refund planning process” by sharing savings messages in the months before the filing season.

Key Takeaways

• Refund savings behaviors are associated with

improvements in financial well-being in the months after tax filing.

– Echoes other research on liquid assets and financial well- being, but important to think about savings programs as part of a larger ecosystem promoting financial security.

• Savings is only one use of the refund, and not

necessarily the most important one.

Implication: Filing platforms should consider offering services that help households optimize the use of the refund for other

• bligations. Access to benefits; financial coaching; secured

credit cards; debt management services; etc.

Filers and Refunds

Tim Lucas

Director of Research SaverLife

Tax Time for SaverLife Members

Alternate Title/End Slide

How SaverLife Works

1. Sign up to receive financial coaching, access to tools and calculators, and other member benefits 2. Link your existing savings account to our platform to begin tracking your savings 3. Have a chance to win prizes for saving, receive tailored savings advice

We’re Helping Over 6,000 Californians Save

Our 220,000+ Members Are Spread Throughout the United States 40,000+ have linked their bank accounts to earn rewards and prizes for saving

More about our Savers

82% Women

Latino, 16% Caucasian, 38% African Americ an, 32% Multiple, 9% Asian / Pacific, 4% Other, 2%

$32,000 average income 87% do not have a college degree 64% single parents Members’ Sources of Income

Other/Multiple: 29% Not earning any income: 18% Disability Benefits: 17% Full-time: 20% Part-time: 14% Multiple part-time jobs: 1% Self-employed: 0.4%

How SaverLife Works

Digital scratch cards incentivize saving and drive engagement Pledging primes people to take action Stories unite people and normalize behaviors

SaverLife’s Impact

* Based on people saving in Savings accounts where data is available at least 6 months before joining SaverLife ** For Members who are successful participants in the SaverLife program – defined as increasing savings in six mont

Tax Time Savings Pledges

Derkisha - SaverLife’s Surprise $5,000 Tax Time Contest Winner

The SaverLife team traveled to Texas to surprise Derkisha with the news that she was our Grand Prize winner and won $5,000. Derkisha is currently getting her degree in nursing. When she graduates and starts working, her goal is to buy some land and build her “forever home” – a home where her kids can play and be safe, and come back to when they are older . The $5,000 will go straight into savings so that she can make that dream a reality.

Refund Sizes Across Savers

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% $0 - 500 500 - 1,000 1,000 - 2,500 2,500 - 5,000 5,000 - 7,500 7,500 - 10,000 > $10,000

Refund Sizes

When People Receive Their Refunds

0% 10% 20% 30% 40% 50% 60% Jan Feb Mar Apr May Jun

Most People Filed Well Before April (Receipt of Federal Refunds)

Changes in Savings Account Balances

• 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 Jan Feb Mar Apr May Jun

Changes in Savings Balances Since 1/31 for People Receiving Refunds in February

Savings Deposits Savings Withdrawals

Spending Data Shows What Refunds Are Used For

Thanks!

The VITA Experience

Zoraima Diaz-Pineda

Financial Security Manager CDC of Brownsville

come dream come build

Credit

Time Restraints

Process

Response Bias

Tax Time Savings: Implementation

Timing of Survey

Methodology

Paper Survey Pre-Tax Preparation

Process

Survey Questions

Challenges Revisions

Finding 3: Client Priorities

Pay Down Debt Purchase Household Necessities Save for Emergencies

Finding 4: Site Coordinator Priorities Respecting Clients Accurate Returns

√

Keeping Up with Demand

Tax Time Moment & Financial Wellbeing

Home Car Debt Reduction Increase Savings College Increase Credit Score Residency Business Tax Time Moment

Increase Capacity to Offer Program and Products

Financial Coaching & Housing Counseling Financial Empowerment Workshops cdcb Saves IDA Matched Savings & Tax Time Savings Debt Reduction & Credit Building

Zoraima Diaz-Pineda zdiaz@cdcb.org

Key Questions

▪Do VITA clients want to save their tax refunds? ▪Do VITA clients want to learn about financial products and services at tax time? ▪If so, what are they interested in? ▪Are these products and services being offered? ▪What are the key barriers for staff and clients?

▪ The average VITA client intends to save his/her refund for more than 6 months and is interested in learning about financial products.

Do VITA clients want to save their refunds and are they interested in learning about products and services at tax time?

What Products and Services are clients most interested in?

Product Interest varies slightly by savings intention

Those who plan to save are more interested in almost all products and services at tx time.

What Products and services are currently offered?

For VITA staff, what are the barriers to offering products and services at tax-time?

➢ LMI tax filers are saving a portion of their refund at higher rates than previously thought

• r measured, but a number of filers who intend to save are not successful when they get

their refund. ➢ Savings is just one of the uses of the refund and not the most important use for many LMI tax filers. ➢ Despite evidence that interventions can support successful savings, there are many barriers to integrating savings programs and other financial capability services into VITA sites.

Recap

What is the relationship between tax time savings and the financial well-being of LMI taxpayers? What is the relationship between tax time savings supports and interventions and taxpayer savings behaviors and balances? ➢ Tax filers who successfully saved experienced fewer hardships and higher financial well-being after filing their taxes.

➢ People are saving, but a number of filers who intend to save are not successful when they get their refund. ➢ Savings is just one of the uses of the refund and not the most important use for many LMI tax filers. ➢ Despite evidence that interventions can support successful savings, there are many barriers to integrating savings programs and other financial capability services into VITA sites. ➢ Tax filers who successfully saved experienced fewer hardships and higher financial well- being after filing their taxes.

Implications

There is an opportunity for the field to bridge the savings intention-action gap. There is an opportunity for VITA and other platforms to offer services that can help households maximize the use of the refund for other obligations, such as essential bills

• r paying down debt.

The field may need to enlarge its view of "savings" and “tax-time financial capability” beyond just deposits into savings accounts and opening other accounts. There is an opportunity for standardization and improvement in the implementation of the most successful practices for promoting savings and financial capability supports at VITA sites.

Discussion

What questions do you have? Share them in the Questions box!

Thanks to Today’s Speakers

Tim Lucas

Director of Research SaverLife

Zoraima Diaz-Pineda

Financial Security Manager CDC of Brownsville

Stephen Roll

Research Assistant Professor Social Policy Institute

Susan Mason

Director Intuit Financial Freedom Foundation

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